Southwest CEO Gary Kelly is congratulated as Southwest Airlines employees react to the City Council Members' approval of Hobby Airport expanding on Wednesday, May 30, 2012, in Houston. Houston City Council approved a $100 million expansion of Hobby Airport, which allows Southwest Airlines to start international flights for the first time in more than 40 years.

Photo: Mayra Beltran, Houston Chronicle

Southwest CEO Gary Kelly is congratulated as Southwest Airlines...

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A Continental Airline employee walks passed Southwest Airlines employees celebratingafter City Council Members approved a $100 million expansion of Hobby Airport.

Photo: Mayra Beltran, Houston Chronicle

A Continental Airline employee walks passed Southwest Airlines...

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Employees of Southwest Airlines applaud Wednesday after Houston City Council voted to approve a Hobby Airport expansion that involves the creation of an international terminal.

Photo: Mayra Beltran, Houston Chronicle

Employees of Southwest Airlines applaud Wednesday after Houston...

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Southwest Airlines CEO Gary Kelly and Southwest employees in Houston City Council chambers for the vote on the Hobby Airport expansion Wednesday, May 30, 2012. (Mayra Beltran / Chronicle)

Southwest Airlines CEO Gary Kelly and Southwest employees in...

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Council Member Jerry Davis votes against airport expansion on Wednesday, May 30, 2012, in Houston. Houston City Council approved a $100 million expansion of Hobby Airport, which allows Southwest Airlines to open international flights for the first time in more than 40 years.

Photo: Mayra Beltran, Houston Chronicle

Council Member Jerry Davis votes against airport expansion on...

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United Airlines employees wearing "Keep IAH (Bush Intercontinental Airport) Strong" stand quietly while speakers address City Council Members before they vote on Wednesday, May 30, 2012, in Houston. Houston City Council approved a $100 million expansion of Hobby Airport, which allows Southwest Airlines to open international flights for the first time in more than 40 years.

Photo: Mayra Beltran, Houston Chronicle

United Airlines employees wearing "Keep IAH (Bush Intercontinental...

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Scott Williams, Southwest employee, speaks Wednesday with Tuan Kincaid, United employee, minutes before Houston City Council voted on the Hobby Airport expansion.

Photo: Mayra Beltran, Houston Chronicle

Scott Williams, Southwest employee, speaks Wednesday with Tuan...

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Southwest Airlines CEO Gary Kelly claps after Houston City Council voted to approve an expansion at Hobby Airport that will include an international terminal.

Photo: Mayra Beltran, Houston Chronicle

Southwest Airlines CEO Gary Kelly claps after Houston City Council...

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United employees wearing "Keep IAH (Bush Intercontinental Airport) Strong" sat opposite side of the room from Southwest employees during the City Council meeting where members will cast their votes on Wednesday, May 30, 2012, in Houston. Houston City Council approved a $100 million expansion of Hobby Airport, which allows Southwest Airlines to open international flights for the first time in more than 40 years.

Photo: Mayra Beltran, Houston Chronicle

United employees wearing "Keep IAH (Bush Intercontinental Airport)...

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Council Member James Rodriguez has a Southwest Airlines T-shirt covering his chair while City of Houston Council Member Stephen C. Costello listens to speakers before voting at City Hall on Wednesday, May 30, 2012, in Houston. Houston City Council approved a $100 million expansion of Hobby Airport, which allows Southwest Airlines to open international flights for the first time in more than 40 years.

Photo: Mayra Beltran, Houston Chronicle

Council Member James Rodriguez has a Southwest Airlines T-shirt...

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Southwest employee Norma Martinez applauds with United Airlines employees in the background as City Council members make remarks before voting on Wednesday, May 30, 2012, in Houston. Houston City Council approved a $100 million expansion of Hobby Airport, which allows Southwest Airlines to open international flights for the first time in more than 40 years.

Photo: Mayra Beltran, Houston Chronicle

Southwest employee Norma Martinez applauds with United Airlines...

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Southwest employee Scott Williams applauds as he sits next to United Airlines employee Tuan Kincaid while City Council listens to speakers before voting on Wednesday, May 30, 2012, in Houston. Houston City Council approved a $100 million expansion of Hobby Airport, which allows Southwest Airlines to open international flights for the first time in more than 40 years.

Photo: Mayra Beltran, Houston Chronicle

Southwest employee Scott Williams applauds as he sits next to...

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Council Member James Rodriguez speaks with City Council Member Mike Sullivan as they listens to speakers before voting on Wednesday, May 30, 2012, in Houston. Houston City Council approved a $100 million expansion of Hobby Airport, which allows Southwest Airlines to open international flights for the first time in more than 40 years.

Photo: Mayra Beltran, Houston Chronicle

Council Member James Rodriguez speaks with City Council Member Mike...

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(Left to right) Southwest CEO Gary Kelly is embraced by SWA Flight Attendant Deborah Aylor while employees celebrate outside City Hall on Wednesday, May 30, 2012, in Houston. Houston City Council Members approved a $100 million expansion of Hobby Airport, which allows Southwest Airlines to open international flights for the first time in more than 40 years.

Photo: Mayra Beltran, Houston Chronicle

(Left to right) Southwest CEO Gary Kelly is embraced by SWA Flight...

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Norma Martinez holds an agenda for today's City Council meeting where council members are still listening to speakers before voting on Wednesday, May 30, 2012, in Houston. Houston City Council approved a $100 million expansion of Hobby Airport, which allows Southwest Airlines to open international flights for the first time in more than 40 years.

Photo: Mayra Beltran, Houston Chronicle

Norma Martinez holds an agenda for today's City Council meeting...

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Southwest CEO Gary Kelly is congratulated as Southwest Airlines employees quietly react to the City Council Members' approval of Hobby Airport expanding on Wednesday, May 30, 2012, in Houston. Houston City Council approved a $100 million expansion of Hobby Airport, which allows Southwest Airlines to start international flights for the first time in more than 40 years.

Photo: Mayra Beltran, Houston Chronicle

Southwest CEO Gary Kelly is congratulated as Southwest Airlines...

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Councilman Jerry Davis, whose district includes Bush Intercontinental, said he voted against the plan because he worries about adverse economic fallout.

Photo: Mayra Beltran

Councilman Jerry Davis, whose district includes Bush...

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A United Airlines employee walks past a group of Southwest Airlines employees celebrating outside City Hall after the council approved Southwest's $100 million international expansion plan for Hobby Airport.

Photo: Mayra Beltran

A United Airlines employee walks past a group of Southwest Airlines...

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Southwest Airlines employees cheer out loud after the City Council votes 16-1, which authorizes five international gates and a Federal Inspection Services facility at Hobby Airport on Wednesday, May 30, 2012, in Houston. Houston City Council approved a $100 million expansion of Hobby Airport, which allows Southwest Airlines to open international flights for the first time in more than 40 years.

Photo: Mayra Beltran, Houston Chronicle

Southwest Airlines employees cheer out loud after the City Council...

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United employees wearing "Keep IAH (Bush Intercontinental Airport) Strong" sat opposite side of the room from Southwest employees during the City Council meeting where members will cast their votes on Wednesday, May 30, 2012, in Houston. Houston City Council approved a $100 million expansion of Hobby Airport, which allows Southwest Airlines to open international flights for the first time in more than 40 years.

Photo: Mayra Beltran, Houston Chronicle

United employees wearing "Keep IAH (Bush Intercontinental Airport)...

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Southwest Airlines CEO Gary Kelly and Southwest employees in Houston City Council chambers for the vote on the Hobby Airport expansion Wednesday, May 30, 2012. Council approved a $100 million expansion of Hobby Airport, which allows Southwest to start international flights for the first time in more than 40 years. (Mayra Beltran / Chronicle)

The City Council approved a plan on Wednesday that will give Houston two international airports, settling a debate over whether flights from Hobby to Latin America would boost the local economy or divide the city against itself and trigger layoffs, canceled routes and stagnation at Bush Intercontinental Airport.

Within hours, United Airlines told employees in a bulletin that, as a result of the council vote, it would be cutting planned operations at Bush Intercontinental by 10 percent and eliminating 1,300 Houston jobs, with the first buyouts, transfers or pink slips going out in the fall. It immediately canceled planned service to Auckland, New Zealand.

The council's 16-1 vote, according to the bulletin, also puts in "significant doubt" whether United will complete a planned $700 million expansion of Terminal B at Bush Intercontinental on which it broke ground in January.

"We believe that splitting Houston's international air service is the wrong decision for the city's future, but we respect the fact that City Council did not agree," United spokeswoman Mary Clark said in a released statement.

"I'll wait to see that they do that," she said. "I think United is committed to this city and that they're going to do their best to continue to grow jobs here in Houston. We already know that we provide a much more competitive environment in terms of cost of living and workforce than any of their other hub areas. They committed early on that we would be the largest hub in the largest airline in the world and that's the commitment I expect them to keep."

She added later, "They've stated continuously that they welcome competition. That competition is at least three years away. So, for United to say there are going to be 1,300 people laid off next week or so, that's just not reasonable. Because nothing is going to happen until that terminal is built. There's no competition today. So any decisions they make in terms of personnel are based on other things - not the vote we cast today."

$100 million project

Under the plan approved by the council, Southwest will pay $100 million up front to build five international gates and a customs facility at Hobby. In exchange, the airline receives control of four of the five gates, free rent in the new facilities and a rebate based on how much sales inside Hobby increase once Southwest launches its first planned international departures in 2015.

"This is what we were sent here to do. We were sent here to expand business, to create opportunities to continue the growth in our great city," said District I Councilman James Rodriguez, who represents the southeast area of the city where Hobby is located. "This is yet another historic day in the city of Houston, and it's also another historic day in aviation."

The council supported the proposition that Southwest's entry into the international market will lower fares, cause more people to fly, and pump up the Houston economy.

"I can guarantee you that our fares are going to be lower than our competition," said Southwest CEO Gary Kelly, who repeatedly visited Houston to pitch the proposal. "It's all about competition. It's all about lowering fares, and more traffic means more jobs."

Lone dissenter

United, which has a virtual lock on Latin American flights from Houston, opposed the expansion.

Councilman Jerry Davis, whose District B includes Bush Intercontinental, cast the lone negative vote. "I don't think the people of the city of Houston really understand what could transpire," said Davis, who worried that it will cost jobs and hurt businesses in north Houston. "I pray that I'm wrong."

Though Davis stood alone in the vote, several of his colleagues openly acknowledged that they were torn. The council had to pick between diametrically opposite visions of the consequences of choosing a side in an epic corporate battle between the nation's largest domestic carrier and the world's largest airline. A city study forecasts as many as 18,000 new jobs and $1.6 billion in annual economic impact from Hobby, while United's own study predicts 3,700 lost jobs in the region and a loss of $300 million in annual economic impact.

Popularity contest?

Failure to approve Hobby expansion would have driven Southwest to shop its expansion plans in San Antonio or another competing city, Southwest leaders said.

Embracing Southwest, however, could trim back United's expansion plans at Bush Intercontinental and strip it of its status as the largest hub of the world's largest airline. Even some of those who cast votes in favor of Hobby did so with some trepidation.

"I'm concerned that we're about to reverse 45 years or more of aviation policy without having had the opportunity to have a sober discussion about this matter around the council table," said District J Councilman Mike Laster. "To me, at times this proposal has felt more like a public relations campaign or a popularity contest rather than an attempt to forge good public policy. I regret that I am not yet wholly convinced that the greater metropolitan area, with its population of just over 6 million people, is large enough to operate two international airports within one system without inflicting damage of some sort."

After the vote, scores of United employees wearing blue shirts with the slogan "Keep IAH Strong" silently filed out of the room while Parker temporarily waived rules against cheering in chambers to permit an eruption of hollering and applause from Southwest employees in yellow T-shirts with the words "Free Hobby."